Accounts Payable Software

There are only two ways to increase the bottom line - increase sales or control expenses. Accounts payable is the last chance to control expenses prior to money going out the door. Adequate software is a critical part of ensuring expense management success. This guide provides a practical how-to for selecting the right AP software to cut unnecessary costs and create efficiency in payables processing.

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“The companies and representatives you sent our way were prompt and thorough… I definitely would recommend your company as a means to exploring options with qualified providers.”— Bruce Conley

“Your service saved me some very valuable time and hooked me up with some excellent resources. Thanks for providing this top-notch service.”— Linda Vittori

“Thanks! Having a service like this to help navigate the ocean of accounting software and help identify potential good-fits without having to delve through numerous bad-fits is of tremendous value!”— Mark Carpenter

What is Accounts Payable Software?

Accounts payable software provides the ledger and related software functionality for managing money owed by an organization to creditors. It provides a coordinated system for ensuring AP automation for tasks such as invoice processing, payables approvals, and executing payments.

Key financial benefits include:

Decrease labor costs related to paying expenses through automation

Avoid late payment penalties & take advantage of early payment discounts

Free up cash for interest earning positions or other business uses of capital by better timing of payments

Payment approvals require authorization based on user privelege levels in order to control final payment of accounts payable items

Due date alerting

Custom notifications based on due dates can alert the relevant employees responsible for executing payments and help them avoid late fees via system messages, emails, or SMS

Positive pay support

Positive pay is a means of enabling financial institutions from paying fradulent checks by uploading records of authorized payments for cross-verification

How to Find the Right AP Software Solution

Accounts payable software provides tools to help drive down costs, increase productivity, improve cash management and improve vendor relations. Understanding software options is critical to finding the best software program for your use.

Managing expenses is a task that every business, government agency, church, non-profit, or school faces. The size of your organization, your existing information system environment, and your particular functional requirements will determine which AP software option is right for you. In fact in most cases, accounts payable functionality will be part of a larger accounting or ERP system. Understanding your options in terms of which payables solutions are right for your needs can help you make the right call on a full accounting or ERP system.

Executive Initiatives Enabled by Accounts Payable Software

AP automation helps drive down cost. AP reports provide information on how much your firm is buying and from whom. This provides you with the information needed to negotiate with vendors for better payment terms and purchase price. This also helps you decide whether to consolidate purchases to fewer vendors and gain price breaks or move purchases to alternate vendors if better pricing or terms are available.

The right software can improve your payables efficiency. Strong AP software improves your staff efficiency by reducing the time needed to issue checks and prepare month/year end reports, reduce payment errors including duplicate payments and eliminate vendor late fees. Reduced errors means less time spent making corrections.

Reporting features in payables programs can help dramatically improve your cash management capabilities. Strong accounts payable software improves your cash management by helping decide when you should pay an invoice. Some vendors offer discounts for early payment, accounts payable software tells you if it’s better to make the payment now and take the discount or hold the payment for a later time. Scam artist abound, accounts payable software helps to determine the legitimacy of vendor invoices. And during hard times, accounts payable software helps you to negotiate with vendors so you can pay bills on a schedule that is more in sync with your incoming cash.

Improved vendor relations are a frequent outcome of better accounts payable software capabilities. Many accounts payable solutions now include support for ACH (Automated Clearing House) payments. ACH payment processing reduce the time spent and the cost of physical printing checks and mailing checks. Companies also use ACH or other forms of electronic payment to reduce instances of fraud and errors. ACH and electronic payment options are another example of how accounts payable software can reduce your costs.

Factors to Consider

Entering records and check printing. The most fundamental part of the payables process is recording the entry and cutting the check. The level of automation at this stage will surely have consequences in terms of the time you spend managing your accounts payable. When considering different accounts payable options, you’ll want to evaluate how different payables options provide you the ability to populate check fields, schedule batch check prints, and prepare the actual mailing of these payments.

Reporting. The ability to report on your accounts payable entries can have a significant impact on helping you to tighten your cash flow. For instance, if you discover you’ve been assessed interest charges by a vendor, you’ll want the ability to report on which payables have caused the charges. The amount of data available in these types of reports will be critical in helping you to quickly determine why the charges have occurred, the responsible parties, and how to avoid similar costs in the future. At a minimum level, you’ll want to create reports based on expense type, due date, payment date, payment period, payment status, internal source, and vendor. Perhaps most importantly, your accounts payable module needs to clearly show you which payments have been made, which have been made but have not yet cleared, and which have been processed.

The master vendor list. Your accounts payable module will not only track individual payments, but also provide you with an ongoing vendor database. The vendor list will need to be able to track information such as contact info, addresses, vendor terms, and other data. The precise way that each software package handles the vendor list will vary. You’ll want to make sure that the software supports all the vendor information you need to keep on hand. For instance, you may have a pre-established convention for setting up vendor codes. Does the software support the necessary number of characters and digits your codes require? The vendor list should also be easily sorted and exported for printing.

Purchase order and invoice reconciliation. Your accounts payable software should include controls to identify the authenticity of each payment. No one likes to think they’ve lost money through errors or fraud, but audits often turn up evidence this has happened. Associating each payment record with the original purchase order and/or the vendor bill helps reduce errors and fraud. Your software package should eliminate unauthorized payments specifically by reconciling invoices and PO’s with the corresponding AP entry.

1099 reporting (US). Throughout the year, it’s likely that you’ll make non-payroll payments to non-corporate entities at some point. As the payee, you are responsible for providing the 1099 tax form. Your AP module should allow you to flag these payments and create the necessary paperwork.

Integration. Accounts payable transactions don’t occur in a vacuum; they’re part of larger business processes. Most importantly, your Accounts Payable module should efficiently deliver the payables ledger information regarding current liabilities to the balance sheet located in the general ledger. In many integrated accounting systems, this happens in real time. If for some reason integration isn’t possible, make sure the Accounts Payable module exports data to the general ledger in a format that it can interpret. Another key integration point is with the purchase order module. Integration with the Purchase Order module is important as both Accounts Payable and Purchase Order processes benefit from mutual access to the master vendor list. Bank reconciliation capability functionality may also be contained in its own application. If this is the case, integration is critical to identify which payments have been made and to reconcile the Accounts Payable and bank records.

Alternate payment methods. Many accounts payable solutions now include support for ACH (Automated Clearing House) payments. The advantage of using ACH payments is that it reduces the cost of physical printing checks, mailing checks and leads to quicker turn around in completing transactions.

Payment planning. The payment terms for different vendors vary greatly. There can also be an advantage to keeping cash on hand—potentially earning interest—until payment is actually required. Conversely, it can be beneficial to make early payments if there is a financial incentive for doing so. Some accounts payable software provide the ability to identify upcoming payments and when it is most beneficial to make the payment and take advantage of cash discounts offered by your vendors.

Advanced reporting. The level of reporting functionality will vary greatly between different solutions. Not all accounts payable packages will include the functionality, but the ability to customize fields, report using complex instructions, and create graphical reports can create additional efficiencies.

Rebates and vouchers. Accommodating the payment of funds that may or may not actually be cashed, creates a unique accounting challenge. Certain accounts payable modules will provide specially developed tools to manage these transactions.

Adam Bluemner is a Managing Editor at Software Connect.
He and his colleagues have been
helping businesses like yours
find top accounts payable software options
since 1996.

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Popular Accounts Payable Software Products

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“The companies and representatives you sent our way were prompt and thorough… I definitely would recommend your company as a means to exploring options with qualified providers.”— Bruce Conley

“Your service saved me some very valuable time and hooked me up with some excellent resources. Thanks for providing this top-notch service.”— Linda Vittori

“Thanks! Having a service like this to help navigate the ocean of accounting software and help identify potential good-fits without having to delve through numerous bad-fits is of tremendous value!”— Mark Carpenter

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Check printing

Maintain detailed vendor account records

General ledger integration

Purchase order integration

ACH payment support

Advance payment scheduling

Check reconciliation

Cash-flow analysis

Report by payment status (open, closed, pending)

Apply payments to multiple GL accounts

Partial payment support

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